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TMI BlogCORPORATE RESTRUCTURING - MERGER AND AMALGAMATIONX X X X Extracts X X X X X X X X Extracts X X X X ..... Enhancing economy (cost reduction) and improving efficiency (profitably). When a company wants to grow or survive in a competitive environment, it needs to restructure itself and focus on its competitive advantage. Merger - A Merger can be defined as the fusion or absorption of one company by another. It may be understood as an arrangement whereby the assets of two or more companies get transferred to, or come under the control of one company (which may or may not be one of the original two companies). The Shareholders of the company whose identity have been merged are then issued shares in the capital of the new merged company in accordance with Share Exchange Ratio. Amalgamation - Amalgamation is an arrangement or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng competition, saving costs by reducing overheads, capturing larger market, pooling technical or financial resources. Optimum Use of capacities and factors of production Tax advantage Carry forward and setoff of losses of a loss making amalgamating company against profits of a profit making amalgamated company Financial constraints for expansion can be removed Diversification Advantage of Brand Equity Survival Revival of Sick Company Substantial Growth. Categories of Mergers 1. Cogeneric Merge r Within same industries and at the same level of economic activity (a) Horizontal Merger Merger between business competitors who are manufactures or distributors of the same type of pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 392 explains Power of Tribunal to enforce compromise and arrangement. Section 393 lays down Information as to compromises or arrangement that is to be sent with every notice calling a meeting of creditors and members. Section 394 explains Provisions for facilitating reconstruction and amalgamation of companies. Section 394A lays down Notice to be given to Central Government for applications under sections 391 and 394. Section 395 depicts Power and duty to acquire shares of shareholders dissenting from scheme or contract approved by majority. Section 396 lays down Power of Central Government to provide for amalgamation of companies in national interest. Section 396A lays down Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansferor company on the basis of their fair values at the date of amalgamation. The identifiable assets and liabilities may include assets and liabilities not recorded in the financial statements of the transferor company. Where assets and liabilities are restated on the basis of their fairvalues, the determination of fair values may be influenced by the intentions of the transferee company. Treatment of Balance of Profit and Loss Account on Amalgamation In the case of an amalgamation in the nature of merger , the balance of the Profit and Loss Account appearing in the financial statements of the transferor company is aggregated with the corresponding balance appearing in the financial statements of the transferee company. Al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f amortisation of any goodwill arising on amalgamation. Treatment of Goodwill Arising on Amalgamation Goodwill arising on amalgamation represents a payment made in anticipation of future income and it is appropriate to treat it as an asset to be amortized to income on a systematic basis over its useful life. Due to the nature of goodwill, it is frequently difficult to estimate its useful life with reasonable certainty. Such estimation is, therefore, made on a prudent basis. Accordingly, it is considered appropriate to amortize goodwill over a period not exceeding five years unless a somewhat longer period can be justified. - Manuals - Ready reckoner - Law and practice - Reference Guide - Quick Commentary Tax Management I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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